K-Bro Linen Income Fund Announces Strong Growth in Second Quarter Results



    EDMONTON, Aug. 8 /CNW/ - K-Bro Linen Income Fund ("K-Bro") (TSX - KBL.UN)
today announced its financial results for the quarter ended June 30, 2008.

    
    Highlights

    -   Revenue for the three months ended June 30, 2008 was $21.8 million,
        an increase of 17.7% or $3.3 million over the comparable 2007 period.
    -   EBITDA for the second quarter increased by $0.8 million (31.5%) to
        $3.3 million from the second quarter of 2007. The EBITDA margin
        increased to 15.1% in the second quarter of 2008 from 13.5% in the
        second quarter of 2007 primarily due to improvements in the cost of
        Alberta labour.
    -   For the period, K-Bro made cash distributions of $0.275 per unit and
        distributable cash was $0.430 per unit. This amounted to
        distributions of $1.93 million compared to distributable cash of
        $3.01 million for a payout ratio of 64.0%.
    -   Net earnings declined in the second quarter of 2008 to $1.0 million
        from $1.1 million in the second quarter of 2007 as a result of
        increased non cash charges for amortization and a loss on disposal of
        equipment which offset the increased EBITDA.

    Financial Highlights (in $000's except per unit amounts and percentages)

    The following table provides certain selected consolidated financial and
operating data prepared by K-Bro management for the periods indicated:

    -------------------------------------------------------------------------
                                     For the three months  For the six months
                                          ended June 30       ended June 30
    -------------------------------------------------------------------------
                                          2008      2007      2008      2007
    -------------------------------------------------------------------------
    Revenue                            $21,840   $18,560   $41,503   $36,317
    -------------------------------------------------------------------------
    Operating expenses                  18,539    16,050    36,029    31,441
    -------------------------------------------------------------------------
    EBITDA(1)                            3,301     2,510     5,474     4,876
    -------------------------------------------------------------------------
    EBITDA as a % of revenue              15.1%     13.5%     13.2%     13.4%
    -------------------------------------------------------------------------
    Earnings before income taxes           807       881     1,269     1,615
    -------------------------------------------------------------------------
    Income tax recovery                    224       220       554       437
    -------------------------------------------------------------------------
    Net earnings                       $ 1,031   $ 1,101   $ 1,823   $ 2,052
    -------------------------------------------------------------------------
    Basic & diluted earnings per Unit  $  0.15   $  0.20   $  0.28   $  0.37
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Total assets                       $89,531   $74,119   $89,531   $74,119
    -------------------------------------------------------------------------
    Long-term debt, end of period      $ 9,010   $ 9,510   $ 9,010   $ 9,510
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Cash provided by operating
     activities                            691       124     4,441     3,769
    -------------------------------------------------------------------------
    Net change in non-cash working
     capital items                       2,491     2,231       657       773
    -------------------------------------------------------------------------
    Maintenance capital expenditures      (172)     (170)     (242)     (396)
    -------------------------------------------------------------------------
    Distributable cash(1)              $ 3,010   $ 2,185   $ 4,856   $ 4,146
    -------------------------------------------------------------------------
    Distributions declared             $ 1,926   $ 1,511   $ 3,701   $ 3,023
    -------------------------------------------------------------------------
    Payout ratio(1)                       64.0%     69.2%     76.2%     72.4%
    -------------------------------------------------------------------------
    (1) Non-GAAP Measures:
           In order to provide a better understanding of the results, K-Bro
           uses the terms EBITDA, Distributable cash and Payout ratio. These
           are not earnings or cashflow measures recognized by GAAP and have
           no standardized meaning prescribed by GAAP. Therefore, EBITDA,
           Distributable cash and Payout ratio may not be comparable to
           similar measures presented by other issuers. EBITDA is defined by
           management as revenue less operating expenses which represents
           income from operations before amortization. Distributable cash is
           defined by management as cash provided by operating activities,
           plus or minus the net change in non-cash working capital items,
           less maintenance capital expenditures and less cash taxes.
           Management believes this measure reflects the cash generated from
           the ongoing operation of the business. Distributable cash is a
           non-GAAP measure generally used by Canadian income trusts as an
           indicator of financial performance and it should not be seen as a
           measurement of liquidity or a substitute for comparable metrics
           prepared in accordance with GAAP. This measure is commonly used by
           investors, management and other stakeholders to evaluate the
           ongoing performance of K-Bro. K-Bro reports on its payout ratio
           (actual cash distribution divided by distributable cash) because
           this is a key measure used by investors to value K-Bro, assess its
           performance and provide an indication of the sustainability of
           distributions. The payout ratio depends on the distributable cash
           and K-Bro's distribution policy.
    

    The increase in the 2008 second quarter revenue was the result of organic
growth, price increases and the acquisition of the Quebec City operation on
January 31, 2008.
    EBITDA increased by $791 (31.5%) for the quarter compared to the second
quarter of 2007. This is primarily the result of lower labour costs which
decreased to 46.3% of revenue in the second quarter of 2008 from 49.8% in the
second quarter of 2007.
    K-Bro generated cash from operating activities of $691 for the 2008
second quarter, an increase of $567 compared to the second quarter of 2007 as
a result of increased cashflow from operations.

    Outlook

    "We are very pleased with the progress made on labour costs and the
positive impact of our new Calgary plant," said Linda McCurdy, President and
Chief Executive Officer. "When combined with the record quarterly revenues, a
conservative payout ratio and a strong balance sheet, we believe we're well
positioned for further growth in 2008 and beyond."
    Further information can be found in the disclosure documents filed by
K-Bro Linen Income Fund with the securities regulatory authorities, available
at www.sedar.com.

    Corporate Profile

    K-Bro is the largest owner and operator of laundry and linen processing
facilities in Canada. K-Bro provides a comprehensive range of general linen
and operating room linen processing, management and distribution services to
healthcare institutions, hotels and other commercial accounts. K-Bro currently
has processing plants in six Canadian cities: Toronto, Edmonton, Calgary,
Vancouver, Victoria and Quebec City.

    Financial Results

    Figures expressed in percentages are calculated from actual unrounded
amounts.

    Notice to Readers

    This news release contains forward-looking information that represents
internal expectations, estimates or beliefs. Certain statements contained
within this news release constitute forward-looking statements. The use of any
of the words "anticipate", "continue", "expect", "may", "will", "project",
"should", "believe", and similar expressions are intended to identify forward
looking statements. The expectations, estimates and beliefs contained in such
forward-looking statements necessarily involve known and unknown risks and
uncertainties which may cause the Fund's actual performance and financial
results in future periods to differ materially from any expectations,
estimates and beliefs of future performance or results expressed or implied by
such forward-looking statements. These risks and uncertainties include, among
other things, K-Bro's competitive environment, labour costs and stability, the
settlement agreement between the government and unions regarding British
Columbia's Bill 29, utility costs, integration of acquisitions, K-Bro's
dependence on long-term contracts, the availability of future financing, the
impact of the federal government's "Tax Fairness" plan and such other risks
and uncertainties as described in the Fund's periodic reports filed with
Canadian securities regulatory authorities. Accordingly, unitholders and
potential investors are cautioned that events or circumstances could cause
actual results to differ materially from those discussed. The Fund does not
undertake any obligation to publicly revise these forward-looking statements
to reflect subsequent events or circumstances, except as required by
applicable law.

    %SEDAR: 00021539E




For further information:

For further information: Linda McCurdy, President & CEO, K-Bro Linen
Income Fund, Phone: (780) 453-5218; Doug Thomson, FCA, Vice-President & CFO,
K-Bro Linen Income Fund, Phone: (780) 453-5218


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